Spotify shares are down over 61 percent in the past year, hereby raising concerns over the company’s future business model.
Spotify Technology SA (NYSE: SPOT), a Swedish audio streaming and media service company, has announced its Q3 earnings results. Following the announcement, the company’s stock market dropped by approximately 7 perecnt to trade around $90.56 in the after-hours. During the third quarter, the company reported revenue of 3.04 billion euros versus the €3.02 billion expected by analysts, according to Refinitiv.
The dip is likely attributed to the fact that Spotify reported a loss per share of 99 euro cents versus an estimated loss of 85 euro cents per share, according to a study by analysts by Refinitiv.
Spotify noted that its Q3 margins were less than expected, blaming “some softness in advertising,” currency fluctuations, and retroactive royalty payments to songwriters and music publishers.
“This is an early indicator of the concerns businesses are having about the economy,” Spotify CEO Daniel Ek noted. “We’re not concerned about the long term, but it’s definitely impacting us in the short term, and it contributed to the gross margin hit that we had this quarter, too.”
Spotify shares are down over 61 percent in the past year, hereby raising concerns over the company’s future business model.
Spotify and Its Performance in Q3 2022
Despite reporting quarterly earnings that were not pleasing to investors, the company reported an increase in total monthly active users. According to the Q3 earnings report, Spotify’s total MAUs grew by 20 percent year over year to 456 million, up from 433 million last quarter.
The company said that better-than-expected intake in India as a result of a multimedia marketing campaign driving activations and reactivations impacted the MAUs. Additionally, the company attributed its MAUs increase to strength across Latin America, led by Brazil.
Reportedly, the company’s Premium Subscribers grew by 13 percent year over year to 195 million, up from 188 million in the last quarter.
In the third quarter, Spotify announced a partnership with FC Barcelona. The partnership is meant to showcase 14 artists from 8 markets across the on-stadium inventory in three La Liga matches in August and September.
The company anticipates reporting 479 million total MAUs in the fourth quarter and 202 million total premium subscribers. Additionally, the company expects to report a total revenue of €3.2 billion in the fourth quarter, although the figures are subject to uncertainty.
According to market data provided by MarketWatch, Spotify has a market capitalization of approximately $17.98 billion. Having been rated 31 times in the recent past, SPOT shares received an average rating of Over.
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